Correlation Between FTAI Aviation and ServiceNow

Can any of the company-specific risk be diversified away by investing in both FTAI Aviation and ServiceNow at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining FTAI Aviation and ServiceNow into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FTAI Aviation Ltd and ServiceNow, you can compare the effects of market volatilities on FTAI Aviation and ServiceNow and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in FTAI Aviation with a short position of ServiceNow. Check out your portfolio center. Please also check ongoing floating volatility patterns of FTAI Aviation and ServiceNow.

Diversification Opportunities for FTAI Aviation and ServiceNow

0.35

Correlation Coefficient

FTAI Aviation  ServiceNow

Weak diversification

The 3 months correlation between FTAI and ServiceNow is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding FTAI Aviation Ltd and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and FTAI Aviation is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on FTAI Aviation Ltd are associated (or correlated) with ServiceNow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ServiceNow has no effect on the direction of FTAI Aviation i.e., FTAI Aviation and ServiceNow go up and down completely randomly.

Pair Corralation between FTAI Aviation and ServiceNow

Assuming the 90 days horizon FTAI Aviation Ltd is expected to under-perform the ServiceNow. But the preferred stock apears to be less risky and, when comparing its historical volatility, FTAI Aviation Ltd is 1.5 times less risky than ServiceNow. The preferred stock trades about -0.05 of its potential returns per unit of risk. The ServiceNow is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  95,085  in ServiceNow on October 25, 2024 and sell it today you would earn a total of  17,432  from holding ServiceNow or generate 18.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

FTAI Aviation Ltd  vs.  ServiceNow

FTAI Aviation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FTAI Aviation Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, FTAI Aviation is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

ServiceNow

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, ServiceNow showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FTAI Aviation and ServiceNow

The main advantage of trading using opposite FTAI Aviation and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FTAI Aviation position performs unexpectedly, ServiceNow can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ServiceNow will offset losses from the drop in ServiceNow's long position.

The idea behind FTAI Aviation Ltd and ServiceNow pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.